UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                    FORM 10-K

Mark One



(x)      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934

                   For the Fiscal Year Ended December 31, 1997

                                       OR

( )      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934

                        For the Transition period from ___ to___

                         Commission File Number 0-18204

                                AJAY SPORTS, INC.
             (Exact Name of Registrant as Specified in its Charter)


           Delaware                                                39-1644025
-------------------------------                ---------------------------------
(State or other jurisdiction of                (IRS Employer Identification No.)
Incorporation or Organization)

       1501 E. Wisconsin Street
       Delavan, Wisconsin 53115                              (414) 728-5521
---------------------------------------        --------------------------------
(Address of Principal Executive Offices        (Registrant's Telephone Number,
 including Zip Code)                                      including Area Code)

           Securities Registered Pursuant to Section 12(b) of the Act:
                                      NONE

           Securities Registered Pursuant to Section 12(g) of the Act:
                          Common Stock, $.01 par value
                      Units (each consisting of 5 shares of
                          Common Stock and 2 Warrants)
                         Common Stock Purchase Warrants
               Series C 10% Cumulative Convertible Preferred Stock

     Indicate  by check  mark  whether  the  issuer  (1) has filed  all  reports
required to be filed by Section 13 or 15(d) of the  Exchange  Act of 1934 during
the past 12 months (or for such shorter  period that the Registrant was required
to file such reports),  and (2) has been subject to such filing requirements for
the past 90 days.
                                                    Yes    X   No







                                        1

<PAGE>





     Indicate by checkmark if disclosure of delinquent  filers  pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best  of  the  Registrant's   knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in Part  III of this  Form  10-K or any
amendment to this Form 10-K.


     The aggregate  market value of the voting stock held by nonaffiliates as of
February  12,  1998 was  $1,598,711.  The  number of shares  outstanding  of the
Registrant's $.01 par value common stock at February 12, 1998 was 23,274,039.

                       Documents Incorporated by Reference
   Portions of the Registrant's Proxy Statement for annual meeting to be held
                   May 29, 1998 ("1998 Proxy Statement") have
                       been incorporated by reference into
                           Part III of this Form 10-K.








                                        2

<PAGE>




                               Ajay Sports, Inc.
                                     Index
                               December 31, 1997


PART I.                                                                   Page
                                                                         ------
Item 1.  Description of Business                                           4-8

Item 2.  Description of Property                                           8-9

Item 3.  Legal Proceedings                                                   9

Item 4   Submission of Matters to a Vote of Security Holders                 9

PART II.

Item 5.  Market for Registrant's Common Equity and Related
         Stockholder Matters                                             10-12

Item 6.  Selected Financial Data                                            13

Item 7.  Management's Discussion and Analysis                            14-17
Item 8.  Financial Statements                                       F-1 - F-19

Item 9.  Changes in and Disagreements with Accountants on
         Accounting and Financial Disclosure                                17

PART III.

Item 10. Directors and Executive Officers of the Registrant                 18

Item 11. Executive Compensation                                             18

Item 12. Security Ownership of Certain Beneficial Owners and
         Management                                                         18

Item 13. Certain Relationships and Related Transactions                     18

PART IV.

Item 14. Exhibits, Financial Statement Schedules, and Reports on
         Form 10-K                                                       19-22

SIGNATURE PAGE                                                              23











                                        3

<PAGE>



                                     PART I

Item 1.  Description of Business

General

     Ajay Sports,  Inc. (the "Company") markets and distributes golf clubs, golf
bags, golf accessories, hand-pulled golf carts and casual living furniture (such
lines of business hereinafter  collectively referred to as the "Sports Business"
or  "Sports").  The  Company  is  presently  one of the  largest  United  States
distributors  of  golf  accessories,  as  well  as one of the  nation's  largest
manufacturers and distributors of golf bags and hand-pulled golf carts.

     The Company operates the mass market segment of its sports business through
Ajay Leisure Products,  Inc.  ("Ajay") a wholly owned subsidiary.  Leisure Life,
Inc. ("Leisure Life"),  another wholly owned operating subsidiary,  manufactures
and markets casual living  furniture.  Palm Springs Golf, Inc. ("Palm Springs"),
another  wholly owned  operating  subsidiary,  manufactures  and/or markets golf
clubs,  golf bags, golf gloves,  accessories  and carts for  distribution to the
off-course pro shop markets. All references to the Company include Ajay, Leisure
Life and Palm Springs unless otherwise specified.

     Ajay's  products  primarily are sold  nationwide to large retailers such as
discount stores, department stores, catalog showrooms and other mass merchandise
and sports specialty outlets. The products  manufactured by the Company are sold
under the Spalding(R),  Palm Springs(R),  Pro Classic(R),  Leisure Life(R),  Pro
USA(R) and private label brand names. Leisure Life's furniture products are sold
through independent retailers,  hardware store cooperatives and larger chains of
home and garden stores.  Palm Springs' products are sold through off-course golf
specialty shops.

     The  Company was  organized  under  Delaware  law on August 18,  1988.  Its
administrative  office is  located at 7001  Orchard  Lake  Road,  Suite 424,  W.
Bloomfield,  MI 48322,  where its telephone  number is (248)  851-5651,  and its
executive and principal manufacturing and distribution facilities are located at
1501 E. Wisconsin Street, Delavan,  Wisconsin 53115, (414) 728-5521. The Company
also operates a manufacturing and distribution facility at 215 4th Avenue North,
Baxter, TN 38544, headquarters for its Leisure Life subsidiary. Headquarters for
Ajay Leisure  Products,  Inc. and Palm Springs Golf, Inc. are located at 1501 E.
Wisconsin St., Delavan, WI 53115.

Business Strategy

     The Company's strategy is to maintain and improve its position as a leading
supplier of golf clubs,  golf bags,  golf carts,  golf  accessories  and leisure
indoor  and  outdoor   furniture.   The  Company  believes  that  the  following
competitive strengths contribute to its position as a market leader:

     Strong Brand Recognition.  Spalding(R), Palm Springs(R), and Pro Classic(R)
are highly  recognized  names in the golf  accessory  industry  and the  Company
believes  that many of its products hold strong  market  positions.  The Company
believes that its brand  recognition and market position  enhance the ability to
sell  products  through  various  channels,  including  mass  merchandisers  and
regional retailers.  A significant portion of the Company's revenues result from
the sale of products  manufactured and sold pursuant to a license agreement with
Spalding Sports Worldwide ("Spalding").  The Company has been selling golf bags,
golf carts, golf gloves and a broad range of general sports accessories pursuant
to this agreement, which expires June 30, 1998.

     Reputation for Quality.  The Company  believes that the  performance of its
products equals or exceeds the performance of its competitors'  products at each
price  point.  To assure the quality of its  products,  the Company  continually
invests in technical design and support,  and tests and monitors the performance
of its products.  At its own  facilities,  the Company relies on its skilled and
experienced  work force for quality  control.  To assure the quality of products
sourced from third-party manufacturers, the Company has established and works to
maintain  close,  long-term  relationships  that  emphasize  service,   quality,
reliability,  loyalty and  commitment.  In  addition,  the  Company  maintains a
sourcing  office in its  largest  foreign  source  markets  to  assure  quality,
reliability, new product ideas and a constant commercial interface.









                                        4

<PAGE>



     Tradition of Innovation. Throughout its history, the Company has maintained
a tradition of new product  development.  New bag styles,  new accessories,  new
gloves,  new  furniture  and other new product  designs for 1998 are  continuing
examples of the Company's commitment in this area.

     Breadth of Product  Lines.  The  Company  offers a wide  selection  of golf
clubs, golf bags, golf gloves,  golf carts and golf  accessories,  and a growing
list of outdoor and indoor  casual living  furniture.  Through its broad product
lines,  the Company offers mass merchants and regional  retailers the ability to
fulfill  product demands and needs from a single source.  The Company's  product
lines  establish it as one of the nation's  leading  manufacturers  of golf bags
along with being a leader in the golf related accessories category.  Its line of
golf bags consist of over 50 models which vary by size,  color, type of material
and related features.  The line of golf related  accessories  consists mainly of
consumable items such as tees, gloves, head covers, practice balls, spikes, golf
ball retrievers, umbrellas and golf training devices.
The accessory category includes over 100 individual items.

     Golf carts, golf bags and related  accessories have historically  accounted
for  approximately  96% of Ajay's  gross  sales.  Golf clubs  historically  have
accounted for 65% of Palm Springs  sales.  In the future,  beginning  with 1998,
Palm  Springs is  emphasizing  bags,  accessories,  gloves and carts over clubs.
Leisure Life's sales consist 100% of indoor and outdoor leisure furniture.

Growth Opportunities

     The Company  believes  that its strong brand  recognition,  reputation  for
quality,  tradition of innovation  and breadth of product  lines  position it to
take advantage of opportunities for future growth including:

     Increased  Distribution.  The Company's products traditionally were sold to
customers through mass merchants and regional retailers. With the acquisition of
certain  assets  of  Palm  Springs  in  October,   1995,  the  Company  now  has
distribution  through off-course golf specialty shops.  Management believes that
those who purchase  golf products  from mass  merchants  and regional  retailers
generally  play golf at municipal  and other public golf  courses.  Based on the
increase  in these types of courses in the last few years,  management  believes
that this market segment will  experience  continued  growth in the near future.
Accordingly,  and  particularly  with the new  distribution  channel opened as a
result  of the  Palm  Springs  acquisition,  the  Company  intends  to  focus on
increasing  its direct sales efforts to include  smaller golf  specialty  stores
where it has historically been  under-represented,  while continuing to maintain
and build upon its position with mass merchandisers and regional retailers.

     New Product  Development.  The Company  believes  that it is  important  to
increase its sales of products through design  improvements and modifications to
existing  products as well as the development and  introduction of new products.
The  Company has  continued  to  introduce  new and  redesigned  products to the
market.  The Company has also  increased  its  emphasis in this area by devoting
additional resources in equipment and personnel.

     The Company is developing  new products for sports,  other than golf,  that
utilize the Company's existing manufacturing capabilities,  specifically its cut
and sew operations, with the goal of commencing sales during the summer and fall
to offset the historical seasonality of the golf lines. Management believes that
it will be able to  determine  the  market  acceptance  for these  new  products
without incurring a significant amount of expense.

     Leisure  Life has  introduced  a new line of swing  furniture  for the 1998
sales year.  This line is again less  expensive  than its previous line of swing
furniture  and  incorporates  improved  product  performance  features,   design
features, improved illustration based instructions, improved packaging, improved
quality  and several  cost  reduction  features.  It also plans to expand on the
convertible  combination  bench/table product. Other new products include a line
of leisure  dining  tables,  storage  shelving,  book cases and  painted  indoor
furniture.

Sports Business

     Golf,  which is the primary  market for Ajay's and Palm Springs'  business,
continues to be a popular  form of  recreation.  According to the National  Golf
Foundation  ("NGF"), a trade  association,  there were 2.7% fewer rounds of golf
played in 1996 than 1995  which was up 5.5% from 1994.  The pace of golf  course
development  also  continues  steadily.  NGF reports  that 429 golf courses were
opened for play in 1997 compared to 442 in 1996 and marking the








                                        5

<PAGE>



3rd straight year where openings exceeded 400. According to NGF market research,
the number of U. S. golfers is approximately 25 million.  This group consists of
80% male and 20% female and 78% are  between  the ages of 17 and 60. The Company
believes there is a great opportunity for increased participation by females and
golfers  under 18 and over  60.  This  belief  is  based on  expected  increased
interest by younger players influenced by Tiger Woods and Karrie Webb, increased
emphasis on women's golf and improvements in health, leisure time and increasing
numbers of people moving into the over 60 group.

     Licensing. A significant portion of Ajay's revenues result from the sale of
products manufactured and sold pursuant to various license agreements,  the loss
of which could have a material adverse effect on the Company's business.

     Ajay sells golf bags,  hand-pulled  golf carts and a broad range of general
sports  accessories  through a license  agreement with Spalding.  The Company is
currently  reviewing a proposal  from  Spalding  Sports  Worldwide to extend its
current license  agreement,  due to expire June 30, 1998, through June 30, 2000.
As consideration for this license, Ajay is required to pay royalties to Spalding
based on a percentage of sales,  subject to annual  minimums of $550,000 for the
years ended June 30, 1997 and 1998.  Other  conditions of the agreement  require
Ajay to expend 2% of sales under the agreement on advertising and related costs,
with 1% remitted to Spalding.  Ajay must also  maintain a ratio of total current
assets  to total  current  liabilities  on a  monthly  basis in  excess  of 1.0.
According to the  proposed  agreement,  Spalding has the right to terminate  the
license  agreement  in the event of any  substantial  change  in the  ownership,
control,  officers or  management  of Ajay.  Approximately  75%, 69%, and 67% of
Ajay's total sales related to products sold under the Spalding license agreement
during the years ended December 31, 1997, 1996, and 1995, respectively.

     Manufacturing and Design. The preliminary production of Ajay's golf bags is
undertaken  at  its  Delavan,   Wisconsin  facility,  where  raw  materials  are
fabricated  in  preparation  for sewing and  assembly  at its  Mexicali,  Mexico
facility. In addition,  Ajay supplements in-house production through utilization
of subcontractors  to produce products  according to its  specifications.  Final
manufacturing,  assembly and  distribution  for Ajay and Palm  Springs  products
occurs at facilities located in Delavan,  Wisconsin.  The Palm Springs facility,
formerly located in California,  was integrated into Delavan beginning  November
14, 1997.

     Design  features,  such  as  color,  decals,   specialized  components  and
decorative   accessories  often  determine  whether  a  golf  product  model  is
successful.  In order to attract and retain  consumers  the Company  updates and
refines its designs on a continuous basis.

     The Company's lines of various  accessory  products are acquired  primarily
from foreign  sources,  principally from the Pacific Rim, and are prepackaged or
repackaged for domestic  distribution.  The packaging  designed by Ajay and Palm
Springs highlights the various features of the products. Ajay's hand-pulled golf
carts are manufactured in-house and overseas.  The Company is not dependent upon
any single source for any of its significant products.

     Marketing and Distribution.  Ajay's product lines  traditionally  have been
distributed primarily through discount stores, department stores, catalog stores
and other mass  merchandise  outlets.  The Company also sells through most major
chain  retailers and off-course  golf  specialty  shops.  The Company's  largest
customer is Wal-Mart,  which  accounted for  approximately  30% of the Company's
sales in 1997. The second and third largest customers  accounted for 15% and 11%
of the Company's  sales. The loss of any of these accounts would have a material
adverse effect on the Company's  results.  The Company believes its relationship
with these customers is good.

     Except for certain  major  accounts,  the  majority of Ajay's  accounts are
serviced by manufacturers'  representatives  working on a commission basis. Ajay
services  its  major   accounts   through  a   combination   of   manufacturers'
representatives  and its own  in-house  sales force.  Palm Springs  services its
customers  through  its  in-house  and  regional  sales  staffs.  The  Company's
management  regularly  consults  with major  customers to discuss  merchandising
plans and programs, anticipated needs and product development.

     The  Company  believes it has good name  recognition  in the  industry  and
attempts  to expand  that  recognition  through  participation  in trade  shows,
advertising in trade  publications and supplying  literature and catalogs to the
retail trade and consumers.









                                        6

<PAGE>



Leisure Furniture Business

     Demographic  changes  have  driven a shift for the last ten years  toward a
casual  living  lifestyle.  This is  evidenced  by the  proliferation  of decks,
patios,  and sun rooms.  Americans  are spending  more time in a relaxed  casual
manner.

     Leisure furniture,  used on porches,  decks, patios, in sun rooms and yards
has  principally  consisted of aluminum,  resin,  wrought iron and low to medium
priced wood  products.  The designs of wood  products  have not been  stylish or
particularly  comfortable  for  seating.  Leisure  Life's "In Motion"  furniture
products,  which feature contoured slings,  adjustability and comfort, have been
received favorably in the leisure furniture market.

     Leisure  Life's  furniture  is  constructed  of a high  grade pine which is
pressure-treated and kiln-dried to prevent  deterioration,  warping, and bending
and to withstand  varying climate  conditions.  The seating  products  utilize a
patented   suspension   seating  system  which  permits  simple   adjustment  to
accommodate   users  of  different   heights  and  weights.   This  system  also
incorporates an ergonomically designed sling and deep cushion seating to provide
lower back support.  Management  believes that its seating products are superior
in comfort to any other  leisure  furniture  product.  The  patented  suspension
system is used on swings,  rocking chairs,  stationary  chairs,  love seats, and
couches.

     In addition to the seating  products,  Leisure Life also  manufactures  bar
height  dining tables with matching  stools,  cocktail and end tables,  a bench,
canopies,  A-frames,  potting  tables,  shelving  and  bookcases  to  comprise a
coordinated line of leisure  furniture.  Management  believes that a coordinated
casual wood furniture line can be marketed for indoor as well as outdoor use.

     Manufacturing.  The  pressure  treated  pine  purchased  by Leisure Life is
planed,  cut,  drilled,  and sanded in the  Baxter,  Tennessee  facility to form
product  components.  A small  portion  of the wood  pieces are  purchased  pre-
manufactured. Fabric for pillows, cushions, slings and canopies are cut and sewn
in-house  and by third party  subcontractors  for final  assembly in the Baxter,
Tennessee  facility.  Furniture  items are packaged in kits  containing the wood
frame pieces, slings, pillows, and necessary hardware, requiring the customer to
assemble the final product.

     Marketing  and  Distribution.  Initially,  marketing  focused on individual
retailers of outdoor and unfinished  furniture  within a 300-mile  radius of the
manufacturing  facility.  Currently,  Leisure Life supplies  nearly 600 selected
small dealers,  several with multiple stores and has developed sales to regional
chains.  Leisure Life distributes  through specialty stores,  such as nurseries,
hardware stores, pool and patio dealers,  home centers and garden shops. Leisure
Life  services its accounts  through its in-house  sales force and  commissioned
sales representatives. Leisure Life has display trucks containing samples of its
furniture  line,  which are used to attract  more  dealers.  In  addition,  more
national   coverage  is  being   developed   through  the  use  of  commissioned
manufacturer's  representatives  and through exhibits at trade shows targeted at
hardware and nursery markets.  The export market also shows a growing  potential
with current sales approaching 20% of total sales.

Inventories and Backlog

     Due to the relatively  short lapse of time between  placement of orders for
products and  shipments,  the Company  normally does not consider its backlog of
orders to be significant to its business. Because of rapid delivery requirements
of its customers, the Company maintains significant quantities of finished goods
inventories to provide  acceptable  service  levels to its customers.  Inventory
turnover  in mass  market  products  is lower than for  furniture  and  reflects
maintenance of high service  standards for its mass market customer base and the
shorter manufacturing time cycle for furniture products.

     The  Company's  products  tend  to have  varying  degrees  of  seasonality.
Shipments from February to May historically have been significantly  higher than
the rest of the  year,  due to the  nature of the golf and  furniture  business.
Management  expects that the indoor leisure  furniture  line including  shelving
being  developed  will  have  higher  shipments  in the  fall.  To  reflect  the
seasonality of the business, inventories will tend to be higher from November to
May.










                                        7

<PAGE>



Competition

     Ajay  competes in the golf bag,  cart and  accessory  business with several
other domestic companies including Wilson, Gold Eagle, MacGregor, Dunlop, Knight
and others. While increased imports of low cost competitive products,  primarily
from the Pacific Rim,  continue to subject  domestic  producers to intense price
competition  and have created  extreme  price  sensitivity,  it also  provides a
source of competitive products for the Company to offer.

     Palm Springs  competes for  specialty  golf store retail space with over 50
competitors.  Retail golf specialty  stores carry many lines. The premium brands
are  represented  by names such as Cobra,  Callaway,  Carsten and Taylor.  Other
competitors are Datrek, Miller, Burton, Gold Eagle and Mitsushiba.  Palm Springs
offers a line of high quality and feature filled products which sell at moderate
price levels and offer consumers high value to price ratios.

     Leisure Life has had limited but rapidly growing operations.  At this time,
Leisure  Life,  as compared to the large number of  manufacturers  of indoor and
outdoor  furniture,  is not a significant  competitor.  In Leisure  Life's niche
market there are no dominant furniture  manufacturers  supplying,  on a national
basis, comparable cushioned,  suspended sling back comfort products specifically
targeted  for  porches,  decks,  patios,  and sun rooms.  There are small  firms
supplying on a regional basis. Competitions include Richie Industries,  Palmetto
Mfg.,  Lakeland  Mills,  Rivenwood and Atwood.  Management does not believe that
there  are any  other  similar  wood  furniture  products  that are  adjustable.
However,   there  is  competition  for  display  space  in  stores,  along  with
competition from other wood,  resin,  aluminum,  cushion,  and plastic furniture
products.

Raw Materials and Components

     Basic materials such as vinyl,  nylon, steel and aluminum tubing,  plastics
and paint  used in the golf  product  manufacturing  and  assembly  process  are
purchased  primarily from domestic sources.  Many of the component parts such as
golf head covers,  graphite shafts, club heads, golf gloves,  light weight carry
golf bags and various other golf  accessories are obtainable  economically  only
from  foreign  suppliers  and,  therefore,  are subject to changes in price as a
result  of  fluctuations  in  foreign   currencies   against  the  U.S.  dollar.
Alternative  sources for raw materials and component  supplies are available and
the Company anticipates no significant  difficulty in obtaining raw materials or
components, although some such purchases may be at increased prices.

     Leisure Life purchases pressure treated pine, fabric, cushion stuffing, and
miscellaneous  hardware  used in the  manufacturing  and  assembly  process from
domestic  sources.  Alternative  sources for raw  materials  are  available  and
Leisure Life has not experienced difficulty in obtaining raw materials.

Patents and Trademarks

     Ajay,  Leisure Life and Palm Springs own several patents and trademarks and
have proprietary knowledge relating to their product lines.  Management does not
believe that the loss of any of its patents would have a material adverse effect
on its business.

Employees

     As of  March  13,  1998,  the  Company  had a total of 418  employees:  120
employees at the Delavan,  Wisconsin  facility,  223  employees at the Mexicali,
Mexico facility and 75 employees at the Baxter,  Tennessee facility. The Company
considers its current relations with its employees to be good.

Item 2.  Description of Property

     The Company's  executive,  and Ajay's primary  manufacturing,  assembly and
warehouse facility,  is located in Delavan,  Wisconsin,  and consists of 186,300
square feet of manufacturing and warehousing space. This space is leased from an
unaffiliated third party under a long-term lease arrangement expiring June 2001,
with an option to renew for an additional  ten-year  period.  The Company has an
option to purchase  the  property at its fair market  value at the end of either
the initial or renewal lease term.









                                        8

<PAGE>



     Through its wholly-owned subsidiary,  Ajay Leisure de Mexico, S.A. de C.V.,
Ajay leases an additional  manufacturing  facility  consisting of  approximately
30,000 square feet in Mexicali, Mexico. The lease expires on January 14, 2005.

     Leisure Life owns its  manufacturing,  assembly,  and warehouse facility in
Baxter,  Tennessee,  which  consists  of  approximately  40,000  square  feet of
manufacturing and warehousing space,  located on 2.8 acres. The property carries
a mortgage in the amount of $210,000.

     Although  relocated in November  1997 to Delavan,  Wisconsin,  Palm Springs
still leases an empty facility in Cathedral City, California,  which consists of
approximately  17,000 square feet.  The lease expires March 1, 2002. The Company
is attempting to sublease or otherwise renegotiate a settlement with the owner.

     These  facilities   adequately  meet  the  Company's   production  capacity
requirements.  The  Company,  on  average,  utilizes  approximately  80%  of its
facility square footage.  In order to avoid periodic total plant shutdowns,  the
Company  adjusts  its  product  production   schedules  to  maintain  sufficient
inventory levels and to maintain a full work force.


Item 3.  Legal Proceedings

     The Company,  through its operating  subsidiaries,  Ajay,  Palm Springs and
     Leisure Life, are involved in various legal proceedings which are normal to
     its business, including product liability and workers' compensation claims.
     The  Company  believes  that  none of this  litigation  is likely to have a
     material  adverse  effect on its  financial  condition or  operations.  The
     Company faces the risk of exposure to product liability claims if consumers
     using the  Company's  products  are injured in  connection  with their use.
     While the Company will continue to attempt to take appropriate precautions,
     there can be no assurance that it will avoid significant  product liability
     exposure.  Based on  historical  experience,  Ajay,  Leisure  Life and Palm
     Springs  have  product  liability  insurance  coverage  which  the  Company
     believes is adequate.

Item 4.  Submission of Matters to a Vote of Security Holders

     There were no matters  submitted to a vote of security  holders  during the
fourth quarter.











                                        9

<PAGE>



                                     PART II

Item 5.  Market for Registrant's Common Equity and Related Stockholder Matters

Market Information

     The Company's  Common Stock,  Units,  Warrants and Series C 10%  Cumulative
Convertible  Preferred  Stock are traded on the NASDAQ Stock  Market's Small Cap
Market.  The  following  table sets forth the range of high and low trade prices
given quarterly by NASDAQ for the last two years.


COMMON STOCK                                             TRADE PRICES
------------                                             ------------
1996                                            HIGH                    LOW
----                                            ----                    ---
First Quarter                                 $  .75                 $  .41
Second Quarter                                $  .75                 $  .30
Third Quarter                                 $  .47                 $  .34
Fourth Quarter                                $  .44                 $  .25

1997
----
First Quarter                                 $  .31                 $  .16
Second Quarter                                $  .34                 $  .13
Third Quarter                                 $  .28                 $  .19
Fourth Quarter                                $  .34                 $  .13

UNITS
1996                                            HIGH                    LOW
----                                            ----                    ---
First Quarter                                 $ 4.00                 $ 3.00
Second Quarter                                   N/A                    N/A
Third Quarter                                 $ 2.75                 $ 2.75
Fourth Quarter                                $ 1.50                 $ 1.50

1997
----
First Quarter                                 $ 1.00                 $ 1.00
Second Quarter                                   N/A                    N/A
Third Quarter                                    N/A                    N/A
Fourth Quarter                               $   .75                 $  .75

WARRANTS (Delisted 11/13/1997)
1996                                             HIGH                    LOW
----                                             ----                    ---
First Quarter                                 $  .25                 $ .06
Second Quarter                                $  .25                 $ .16
Third Quarter                                 $  .19                 $ .06
Fourth Quarter                                $  .13                 $ .03

1997
----
First Quarter                                 $  .03                 $ .03
Second Quarter                                $  .05                 $ .02
Third Quarter                                 $  .03                 $ .02
Fourth Quarter                                $  .02                 $ .02














                                       10

<PAGE>



SERIES C PREFERRED STOCK                                 TRADE PRICES
------------------------                                 ------------
1996                                             HIGH                    LOW
----                                             ----                    ---
First Quarter                                 $ 9.63                  $ 6.25
Second Quarter                                $ 9.75                  $ 7.50
Third Quarter                                 $ 8.25                  $ 7.00
Fourth Quarter                                $ 7.50                  $ 6.00

1997
----
First Quarter                                 $ 6.75                  $ 5.25
Second Quarter                                $ 6.00                  $ 4.38
Third Quarter                                 $ 5.00                  $ 4.38
Fourth Quarter                                $ 6.13                  $ 3.00

     The NASDAQ Stock Market, Inc. issued new standards for continued listing of
SmallCap Market  participants  which became effective on February 23, 1998. Ajay
is a SmallCap  Market  participant  and as such falls under these new rules.  On
that  effective  date,  Ajay  did  not  meet  two of the  quantitative  criteria
established by NASDAQ. Under these criteria,  net tangible assets must exceed $2
million and the minimum  bid price must  exceed  $1.00 per share.  Under the new
standards,  NASDAQ has  established  a review  process  for  SmallCap  companies
temporarily out of compliance. If, after the hearing, NASDAQ is satisfied with a
company's  plan to achieve  compliance  with the new  standards  in a reasonable
period of time,  NASDAQ may issue a temporary waiver to prevent  delisting.  The
Company  has  requested a hearing  and  forwarded  to NASDAQ its plan to achieve
compliance.  The NASDAQ  listing  qualifications  panel will consider the matter
during the week of April 6, 1998. The panel's final determination will be issued
in the form of a written decision letter.

Holders

     The number of record holders of the Company's common stock, units, warrants
and Series C preferred  stock  according to the Company's  transfer agent, as of
February 12, 1998 are as follows:

                            Common Stock                  391
                            Preferred C                    11
                            Warrant A                      58
                            Warrant B                       3

     The  Company  believes  that its round lot common  shareholders  total over
1,500 based on a street name shareholder listing breakdown with a record date of
2/12/98.

Dividends

     Holders of shares of Common Stock are entitled to dividends  when,  and if,
declared by the Board of Directors out of funds legally  available.  The Company
has not paid any  dividends  on its Common  Stock and  intends to retain  future
earnings to finance the development and expansion of its business. The Company's
future  dividend  policy is subject to the  discretion of the Board of Directors
and will depend upon a number of factors,  including  future  earnings,  capital
requirements,  limitation  on  distributions  from Ajay to the  Company  and the
financial  condition of the Company.  In  addition,  Ajay's bank loan  agreement
restricts Ajay from paying cash dividends.

     Holders of the Company's  Series C Cumulative  Convertible  Preferred Stock
are  entitled  to  cumulative  dividends  at an annual  rate of $1.00 per share.
Dividends  on the Series C preferred  stock have been  declared and paid through
the year ended  December 31, 1996.  Due to a shortage of operating  funds to run
the business, dividends have not been paid since January 1997. Until the Company
has cash  available for dividends,  it does not  anticipate  declaring or paying
dividends on its Series C preferred stock.











                                       11

<PAGE>



     The Company has declared the following Series C 10% Cumulative  Convertible
Preferred Stock dividends during the prior two years:
<TABLE>
<CAPTION>

                           Declaration Date          Amount per Share             Record Date             Payment Date
                          -----------------          -----------------            -----------            --------------
<S>                       <C>                        <C>                         <C>                      <C>

                              09/25/95                    $0.1825                 10/03/95                  10/25/95

                              12/19/95                    $0.2500                 12/31/95                  01/25/96

                              02/29/96                    $0.2500                 03/29/96                  04/25/96

                              06/14/96                    $0.2500                 06/28/96                  07/25/96

                              09/19/96                    $0.2500                 09/30/96                  10/25/96

                              12/19/96                    $0.2500                 12/31/96                  01/27/97

</TABLE>







                                       12

<PAGE>



Item 6.          Selected Financial Data

Overview

                The following  table presents  summary  historical  consolidated
financial  data  derived from audited  financial  statements  of the Company (in
thousands, except per share amounts).
<TABLE>
<CAPTION>

                                                                         Year    Ended     December    31,
                                                                 1997         1996         1995          1994         1993
                                                                ------       ------      --------     --------     --------
<S>                                                            <C>           <C>         <C>          <C>          <C>
Statement of Operations:
    Net sales                                                   $30,330      $24,341      $18,728       $12,899      $15,902
    Cost of sales                                                26,585       20,759       15,291        12,291       14,172
                                                                 ------       ------       ------        ------       ------

    Gross profit                                                  3,745        3,582        3,437           608        1,730

Selling, general and
    administrative expenses                                       5,837        5,067        3,247         2,747        2,834
                                                                -------      -------       ------        ------      -------

Operating income (loss)                                          (2,092)      (1,485)         190        (2,139)      (1,104)

Nonoperating income (expense):
    Interest expense - net                                       (1,280)      (1,103)         (801)        (614)        (697)

Loss on write down of advances
    to affiliate                                                      -             -            -            -         (123)

Gain (loss) on disposition of
    investment in affiliate, net                                      -             -            -           (38)          -

Other, net                                                         (144)         (38)          (41)         (289)          3
                                                                 -------      -------       -------        ------      --------

Income (loss) from operations before
    income taxes                                                 (3,516)      (2,626)         (652)       (3,080)      (1,921)
                                                                  ------       ------        ------        ------      ------

Income tax expense (benefit)                                          0         (893)         (208)             -           -
                                                                ---------     -------       -------      ----------   ----------

Net income (loss)                                               $(3,516)     $(1,733)     $   (444)      $(3,080)     $(1,921)
                                                                 ======        ======        =======      ========    ========

Net income (loss) per common share                              $  (.17)   $    (.09)   $    (.03)    $    (.27)     $   (.24)
                                                                 ========     ========     ========      ========     ========

Weighted average common and common
    stock equivalent shares outstanding                           23,274       23,242       22,722        12,218         8,812
                                                                  ======       ======       =======       =======      ========

Cash dividends per common share                                        -             -          -              -            -

</TABLE>


<TABLE>
<CAPTION>

                                                                                 December 31,
Balance sheet data:                                           1997          1996         1995         1994         1993
                                                         ---------     ---------   ----------   ----------    ---------
<S>                                                      <C>           <C>         <C>          <C>           <C>

Working capital                                           $  8,200      $  3,348    $   6,323    $     593    $     903
Total assets                                              $ 16,614      $ 18,495    $  18,486    $   9,365    $  10,507
Long term debt                                            $ 13,229      $  5,196    $   5,111    $     121            -



</TABLE>






                                       13

<PAGE>




Item 7.  Management's Discussion and Analysis of Financial Condition and
         Results of Operations

     The Company was formed in 1988 to acquire certain  assets,  liabilities and
operations  of  the  sports   accessory   business  of  Roadmaster   Corporation
("Roadmaster").   The  Company  was  capitalized  initially  through  a  private
placement of stock and an initial public offering (approximately $3.1 million in
net  proceeds),  a  long-term  debt of $4  million  owed to  Roadmaster  for the
purchase of the business, and a revolving credit facility.

     Until October 1993, the Company was controlled,  in part, by Roadmaster and
Equitex.  TICO,  an entity  controlled  by  Thomas W.  Itin,  the  Chairman  and
President  of the  Company,  obtained  control  from  Roadmaster  and Equitex in
October 1993.

     During  August,  1994 the Company  acquired a leisure  furniture  business,
Leisure Life,  Inc.  which has its offices and  operations in Tennessee.  During
October,  1995 the Company  acquired  the assets of two golf  businesses - Korex
Corporation and Palm Springs Golf Company, Inc.. Korex was subsequently absorbed
within the product  lines of Ajay  Leisure  Products,  Inc..  Palm  Springs Golf
continued to operate in its California facility until November 14, 1997 when its
operations  were  consolidated  into  Delavan,  Wisconsin  where  it now  shares
facilities and functions of Ajay Leisure Products,  Inc. This consolidation step
was taken in order to gain more  effective  business  control,  reduce costs and
expenses  and  de-emphasize  the golf club  business,  while  growing  its other
product  lines  (bags,  gloves,  accessories,  carts).  As  can be  seen  in the
accompanying financial statements, footnote 8, Ajay Sports' operating loss was a
result of the poor  performance of Palm Springs Golf. The golf club line was the
major  contributor to its losses.  By consolidating  operations,  de-emphasizing
clubs and  expanding  other  lines,  the Company  believes it can  significantly
reduce Palm Springs' operating loss in 1998.

Results of Operations

Net Sales

     Net sales in 1997 were $30.3 million,  an increase of $6.0 million,  or 25%
when  compared to 1996 sales.  The sales  increase in the golf  product line was
$4.3 million or a 20% increase. This occurred totally in mass market golf sales.
The Company  registered no sales  increase to specialty  golf stores.  Furniture
sales  increased  $1.7  million or 63%.  Sales  increases  in the mass  merchant
channel  represent  increased  sales to existing  customers and furniture  sales
increases represent an increase in the customer base, both foreign and domestic.
Historically,  mass market sales has been Ajay's core business. In October 1995,
the Company  acquired  Palm Springs Golf,  Inc.  which opened  another  channel,
specialty golf stores.  Palm Springs was primarily a golf club  manufacturer and
marketer. Due to the difficulty incurred by Palm Springs in marketing its clubs,
the Company has  de-emphasized  club sales and is emphasizing  the sale of bags,
carts,  gloves and accessories to the specialty golf store channel.  In November
1997,  the Company moved the Palm Springs  operations to its Delavan,  Wisconsin
facility with the goal of achieving  administrative  and operating  efficiencies
and reducing the losses experienced by the Palm Springs subsidiary.

    Sales in 1996  were  $24.3  million,  an  increase  of $5.6  million  or 30%
compared  to 1995.  The  overall  sales  increase  occurred in both the golf and
furniture product lines. Sales of golf products increased by $1.2 million in the
mass market and $2.9 million in the golf specialty  store market.  The specialty
market increase was due to the acquisition of Palm Springs Golf in October 1995.
The mass market sales  increase  was due to  increased  sales as a result of the
purchase of a golf product line from Korex Corporation in October 1995. Sales of
furniture  products  increased $1.3 million or 93%. The furniture business began
in August 1994 and contributed $140,000 of sales in that short year.

Gross Margin

    The  Company's  gross  margin  increased  4.6%  to  $3,745,000  compared  to
$3,582,000  for the 1996 year.  Gross  margin as a percent of sales  declined to
12.3% as compared to 14.7% of sales for 1996.  Contributing to this decline were
three factors.  The first was the lack of sufficient  operating liquidity during
1997 which resulted in increased costs in  manufacturing,  logistics and product
substitutions.  The second factor was the poor performance of Palm Springs' golf
club  product line in the  marketplace.  The final factor was the closing of the
Palm Springs Golf facility in California and








                                       14

<PAGE>



consolidating  it into Delavan,  Wisconsin.  These factors  reduced gross profit
margin by approximately 2.0%, 1.6% and 0.7% respectively.

    The gross profit amount for the year 1996 of $3,582,000  increased 4.2% over
the  previous  year,  1995.  As a  percent  of sales,  the gross  margin in 1996
declined 3.7 % when compared to 1995. The decline was due to adverse  results in
the Palm Springs Golf  product  lines,  most  particularly  in golf clubs.  Palm
Springs Golf had been acquired in October 1995 and the turnaround effort in 1996
diluted  management  focus and vital operating and financial  resources from the
companies other business areas resulting in higher costs of production.

Selling, General and Administrative Expenses

    As a percent of sales,  SG&A was 19.2% for 1997  compared  to 20.8% of sales
for the prior year of 1996.  SG&A expenses  during 1997 increased by $770,000 or
15.2%  compared to 1996. The largest  contributor to increased  expenses was the
cost of refinancing the Company which  contributed  nearly 1 percentage point to
SG&A. SG&A expenses during 1996 were $5.1 million which compared to $3.2 million
in the prior year 1995. Approximately $1.4 million of the total SG&A expense for
1996 was  attributable  to the acquisition of Palm Springs Golf. This added $1.4
million to the year 1996.

Interest Expense

    Interest  expense was  $1,280,000 for 1997, an increase of $177,000 over the
prior year. The increase in interest expense in 1997 was primarily the result of
increased  debt to finance Palm  Springs  losses.  Interest  expense in 1996 was
$1,103,000  representing an increase of $302,000 compared to interest expense of
$801,000 in 1995. The increase in interest  expense in 1996 was a result of more
debt to finance  working  capital,  fund Palm Springs  losses and to finance the
acquisitions  of  certain  assets of Korex  Corporation  and Palm  Springs  Golf
Company, Inc.

Income Taxes

The Company had no income tax  liability  during the years  ended  December  31,
1997, 1996 and 1995.

Financial Condition

    At December 31, 1997 the Company had working capital of $8,011,000, compared
with $3,348,000 at December 31, 1996. This $4,663,000  increase  resulted from a
reclassification of short term debt to long term debt as a result of refinancing
during 1997. The ratio of current assets to current  liabilities at December 31,
1997 was 2.8, an increase of 1.5 from the  December  31, 1996  current  ratio of
1.3.

    Inventories at December 31, 1997 were  $6,398,000  compared to $7,957,000 at
December 31, 1996.  Trade accounts  receivable  were  $5,060,000 at December 31,
1997 compared to $5,274,000  at December 31, 1996.  The decrease in  inventories
was due to the reduction in Palm Springs Golf's inventory.

    At  December  31,  1997  and 1996  net  fixed  assets  were  $1,723,000  and
$1,822,000,  respectively.  The  decrease  reflects  depreciation  in  excess of
capital   expenditures   and   disposals   related  to  the  Palm  Springs  Golf
consolidation.

Capital Resources

    The Company expended $250,000 in 1997 for capital expenditures, over half of
which was used for improvements in its furniture  business  manufacturing,  with
most of the balance allocated to golf bag manufacturing.

Liquidity

    Cash flow from operations for 1997 was negative by $800,000,  reflecting the
effect from a $3.5  million  net loss and a partial  offset  from  decreases  in
inventories  of $1.6 million,  receivables  of $0.2 million,  prepaids and other
assets of $0.3 million and  depreciation  and  amortization  provisions  of $0.4
million.  Financing of the  negative  cash flow came from  increased  loans from
affiliated parties.









                                       15

<PAGE>



    The Company's  liquidity  varies with the seasonality of its business which,
in turn,  influences  its  financing  requirements.  The seasonal  nature of the
Company's sales creates  fluctuating cash flow, due to the temporary build-up of
inventories in anticipation of, and receivables during, the peak seasonal period
which  historically has been from February through May of each year. The Company
has relied and continues to rely heavily on revolving credit  facilities for its
working capital requirements.

    In November  1996,  U. S. Bank  advised the Company  that the Company was in
non-compliance  with  certain  covenants  of its loan  agreement.  Ajay had been
operating up until  February  12,1997 on a revolver  limit of $8.5  million.  On
February  12,  the line was  reduced to a $7.0  million  maximum  facility.  The
Company did and continued to make all interest payments on time and has operated
within the limit amounts  contained in the old and new facility lines,  although
restrictions  during  February  and March  curtailed  operating  capability  and
reduced  sales  and  profitability   opportunities  otherwise  available.   This
constriction  forced  the  Company  to rely on  extended  credit  terms from its
vendors and  additional  funds from  affiliated  parties.  On April 14, the bank
agreed  to  restructure  the line to its  former  $8.5  million  limit  although
requiring a $500,000  (subsequently  reduced to  $250,000)  term loan payment in
June and less favorable formula borrowing rates and an increased  interest rate.
The restructured  facility terminated on July 11, 1997 when the Company obtained
a new line from Wells Fargo Bank.

    On July 11,  1997,  the  Company  refinanced  its bank debt  through a joint
$34,088,000 three-year revolving credit and term loan agreement with Wells Fargo
Bank (the  "Loan").  This Loan is a joint and several  obligation of the Company
with an affiliate, Williams Controls, Inc. ("Williams"), under which Williams is
the agent for all of the  borrowers.  The combined Loan  facility  consists of a
$26,000,000  revolving loan facility (the "Revolver"),  a $2,658,000 real estate
loan (the "Real Estate Loan"), a $4,430,000  machinery and equipment loan ("Term
Loan I"), and a $1,000,000 term loan II ("Term Loan II").

    At the closing date, the Company borrowed  $6,825,000 under the Revolver and
$566,000 under Term Loan I. At the date of closing, Williams borrowed a total of
$17,141,000,  consisting of $9,619,000 under the Revolver,  $2,658,000 under the
Real Estate Loan,  $3,864,000  under Term Loan I, and $1,000,000 under Term Loan
II. The proceeds from the Company's and Williams' borrowings under the Loan were
used to repay the  Company's  and Williams'  loans from their  previous  lender,
except for  $2,340,000  which  represents  a bridge  loan to the  Company by the
previous lender. This bridge loan is to be repaid from the sale of assets and/or
excess cash flow and is guaranteed up to $1,000,000 by the Company's President.

    Under the  Revolver,  the Company and Williams can borrow up to  $26,000,000
based upon a borrowing base availability  calculated using specified percentages
of eligible  accounts  receivable and inventory.  The Revolver bears interest at
the Bank's  prime rate (8.5% at December  31,  1997) plus 0.5%.  The Real Estate
Loan and Term Loan I bear  interest at the Bank's prime rate plus 0.75%.  At the
Agent's option,  funds may be borrowed under the Revolver,  the Real Estate Loan
and the Term Loan I at the London InterBank  Offering Rate ("Libor") plus 2.75%,
3% and 3%  respectively.  The  Revolver,  Real  Estate Loan and Term Loan I each
mature on July 11,  2000 and are secured by  substantially  all of the assets of
the Company and Williams.  The Real Estate Loan is being amortized over 20 years
and the  machinery and Term Loan are being  amortized  over seven years with all
remaining  principal  outstanding  due on July 11, 2000. Term Loan II matures on
June 1, 1999 with  principal  payments based upon an  amortization  period of 24
months plus additional  principal payments equal to any excess proceeds from the
sale of one of Williams'  subsidiaries after repayment of any indebtedness under
the  Revolver  borrowing  due from  the  Williams  subsidiary  being  sold  plus
principal   payments  equal  to  50%  of  the  Company's  and  Williams'  annual
consolidated  excess cash flow as defined.  The Loan agreement restricts payment
of any  dividends  by the  Company,  requires  the Company  and  Williams in the
aggregate to maintain  minimum working  capital of $25,000,000  exclusive of the
Revolver and maintain minimum  tangible net worth of $11,000,000.  The Loan also
restricts  additional  indebtedness  and common stock  repurchases and restricts
combined  Company  and  Williams'  annual  capital  expenditures  and  increased
operating  lease  obligations  to  $2,500,000  and $600,000,  respectively.  The
Company  is in  compliance  with  the  covenants  of the  Loan  Agreement  as of
12/31/97.  The Loan agreement  imposes a prepayment  penalty of 3%-5%,  which is
waived if the Loan is repaid with  proceeds from the sale of assets or equity or
is refinanced with an affiliate of the Bank.

    On March 13, 1998 the  Company's  bank,  Wells  Fargo  Bank,  agreed to make
revisions in the existing revolving loan availability  calculations.  The result
is to increase  availability  on its  revolver  by  approximately  $750,000.  In
addition,  Wells Fargo has committed to provide the Company with a separate loan
facility. Williams Controls and the President of the








                                       16

<PAGE>



Company  would be relieved  of their  guarantees  in  exchange  for a $1 million
investment in Ajay Sports by Williams.  It is  anticipated  that this  financing
plan would be completed by the end of April 1998.  Completion of the refinancing
plan should provide the Company with  sufficient  capital to operate through the
next 12 months.


Item 7A.          Derivative Securities and Financial Instruments

    Not applicable.


Item 8.           Financial Statements

    Financial statements are attached hereto following Item 14.


Item 9.  Changes in and Disagreements with Accountants on Accounting and
         Financial Disclosure

    Not applicable.










                                       17

<PAGE>




                                    PART III



Item 10.          Directors and Executive Officers of the registrant

    The  applicable  information  set  forth  in  the  Registrant's  1998  Proxy
    Statement to be filed on or before April 30, 1998 is incorporated  herein by
    reference.

Item 11.          Executive Compensation

     The  applicable  information  set  forth  in the  Registrant's  1998  Proxy
     Statement to be filed on or before April 30, 1998 is incorporated herein by
     reference.


Item 12.          Security Ownership of Certain Beneficial Owners and Management

     The  applicable  information  set  forth  in the  Registrant's  1998  Proxy
     Statement to be filed on or before April 30, 1998 is incorporated herein by
     reference.


Item 13.          Certain Relationships and Related Transactions

     The  applicable  information  set  forth  in the  Registrant's  1998  Proxy
     Statement to be filed on or before April 30, 1998 is incorporated herein by
     reference.








                                       18

<PAGE>



                                     PART IV


Item 14.      Exhibits, Financial Statement Schedules, and Reports on Form 10-K

(a)  1.  Financial Statements:

           Ajay Sports, Inc. and Subsidiaries
           Consolidated Financial Statements of Ajay
           Sports, Inc. and Subsidiaries:

           Reports of Independent Accountants

           Consolidated Balance Sheets - December 31, 1997
           and 1996

           Consolidated Statements of Operations - Years
           ended December 31, 1997, 1996 and 1995

           Consolidated  Statements of Stockholders' Equity Years ended December
           31, 1997, 1996 and 1995

           Consolidated  Statements  of Cash Flows - Years  ended  December  31,
           1997, 1996 and 1995

           Notes to Financial Statements

     2.  Financial Statement Schedules:

           Ajay Sports, Inc. and Subsidiaries:

           Schedule  VIII -  Valuation  and  Qualifying  Accounts - Years  ended
           December 31, 1997, 1996 and 1995

     3.  Exhibits required by Item 601 of Regulation S-K

           The following  exhibits  designated  with a "-" symbol  represent the
           Company's Management Contracts or Compensatory Plans or arrangements
           for executive officers:

         Exhibit 3.1     Articles of Incorporation and
           Bylaws and all amendments thereto  (1)

         Exhibit 4.1     Certificate of Designations of
           Rights and Preferences of the Series A 8%
           Cumulative Convertible Preferred Stock of Ajay
           Sports, Inc.  (2)

         Exhibit 4.2  Amendment  dated  February 9, 1992 to the  Certificate  of
           Designations  of Rights and Preferences of the Series A 8% Cumulative
           Preferred Stock of Ajay Sports, Inc. (4)








                                       19

<PAGE>






                                     PART IV
                                    CONTINUED


         Exhibit 4.3     Certificate of Designations of Rights
           and Preferences of the Series B 8% Cumulative
           Convertible Preferred Stock of Ajay Sports, Inc.  (7)

         Exhibit 4.4     Certificate of Designations of Rights and
           Preferences of the Series C 10% Cumulative Preferred
           Stock of Ajay Sports, Inc.   (8)

         Exhibit 10.1    License Agreement dated April 14,
           1992 between Spalding Sports Worldwide and Ajay
           Leisure Products, Inc.  (2)

         Exhibit 10.2    Licensing Agreement dated
           June 15, 1989 between Roadmaster Corporation and
           Ajay Leisure Products, Inc.  (1)

         Exhibit 10.3 First  Amendment  to the April 14, 1992  Spalding  License
           Agreement dated April 2, 1993 (4)

         Exhibit 10.4    Exchange Agreement dated
           October 13, 1993 between TICO, Ajay Sports,
           Inc., Ajay Leisure Products, Inc., Roadmaster
           Industries, Inc., Roadmaster Corporation
           and Equitex, Inc.  (5)

         Exhibit  10.5  Williams/Ajay  Loan  and  Joint  Venture  Implementation
           Agreement  dated May 6, 1994 as  amended  by Letter  Agreement  dated
           April 3, 1995 (7)

         Exhibit 10.6 Second  Amendment to the April 14, 1992  Spalding  License
           Agreement dated July 1, 1994 (7)

         - Exhibit 10.7      Employment Agreement dated July 31,
           1994 between Robert D. Newman, Leisure Life, Inc.
           and Ajay Sports, Inc.   (7)

         Exhibit 10.8    1994 Stock Option Plan   (6)

         Exhibit 10.9    1995 Stock Bonus Plan   (6)

         Exhibit 10.10 Third  Amendment to the April 14, 1992  Spalding  License
           Agreement dated June 5, 1995 (8)













                                       20

<PAGE>



                                     PART IV
                                    CONTINUED


         Exhibit 10.11   Revolving Loan Agreement dated July 25, 1995
           Between Ajay Sports, Inc. and United States National Bank of
           Oregon, including Guaranties, Security Agreements, and Other
           Loan Documents   (8)

         Exhibit  10.12 First  Amendment  to the July 25,  1995  Revolving  Loan
           Agreement  dated October 2, 1995,  including  amendment to Bulge Loan
           Note, Supplement to Guaranty and Amendment to Revolving Loan Note (9)

         Exhibit 10.13 Credit  Agreement dated July 11, 1997,  among  registrant
           and  its   subsidiaries   and   Williams   Controls,   Inc.  and  its
           subsidiaries,   as   borrowers,   and  Wells  Fargo  Bank,   National
           Association, including Guaranties, Security Agreements, Intercreditor
           Agreement and other Loan Documents (10)

         Exhibit 10.14   Consent Reaffirmation and Release Agreement
           with U. S. Bank and Promissory Note of the Registrant   (11)

         Exhibit 10.15 Security  Agreement dated July 14, 1997, among registrant
           and its  subsidiaries,  as debtors,  and  Williams  Controls  and its
           subsidiaries as secured parties (12)

         Exhibit 21.0    List of Subsidiaries

         Exhibit 23.1    Consent of Independent Accountants

         Exhibit 27.0    Financial Data Schedule

          (1)  Previously  filed with and  incorporated  by  reference  from the
          Registrant's Registration Statement on Form S-18 No. 33-30760.

          (2)  Previously  filed with and  incorporated  by  reference  from the
          Registrant's  Form 10-K filed for the year ended  December  31,  1991.
          (SEC File No. 0-18204)

          (3)  Previously   filed  and   incorporated   by  reference  from  the
          Registrant's  Form 10-Q for the quarterly  period ended  September 30,
          1992. (SEC File No. 0-18204)

          (4)  Previously  filed with and  incorporated  by  reference  from the
          Registrant's  Form 10-K filed for  December  31,  1992.  (SEC File No.
          0-18204)

          (5)  Previously  filed with and  incorporated  by  reference  from the
          Registrant's  Form 10-K filed for  December  31,  1993.  (SEC File No.
          0-18204)

          (6)  Previously  filed with and  incorporated  by  reference  from the
          Registrant's Registration Statement on Form S-8, No. 33-89,650.

          (7)  Previously  filed with and  incorporated  by  reference  from the
          Registrant's  form 10-K filed for  December  31,  1994.  (SEC File No.
          0-18204)









                                       21

<PAGE>



                                     PART IV
                                    CONTINUED


          (8)  Previously  filed with and  incorporated  by  reference  from the
          Registrant's Registration Statement on Form S-2, File No. 33-58753.

          (9)  Previously  filed with and  incorporated  by  reference  from the
          Registrant's  Form 10-Q for the Quarterly  period ended  September 30,
          1995. (SEC file No. 0-18204)

          (10)  Previously  filed with and  incorporated  by reference  from the
          Registrant's  Form 10-Q for the Quarterly  period ended June 30, 1997.
          (SEC file No. 0-18204)

          (11)  Previously  filed with and  incorporated  by reference  from the
          Registrant's  Form 10-Q for the Quarterly  period ended June 30, 1997.
          (SEC filed No. 0-18204)

          (12) Currently filed herein.


(b)  Reports on Form 8-K

         During the last quarter of the 1997 fiscal year,  the Company filed one
report on Form 8-K.

     Date of
     Report         Subject
     --------       --------
     12/10/97       Item 5. Other Events  - Extension of the common stock
                    purchase warrants to June 30, 1998.








                                       22

<PAGE>



                                   SIGNATURES

        Pursuant to the  requirements  of Section 13 or 15(d) of the  Securities
and Exchange Act of 1934, Ajay Sports,  Inc. has duly caused this Report on Form
10-K to be signed on its behalf by the  undersigned,  thereunto duly authorized,
in West Bloomfield, Michigan on the 27th day of March, 1998.

                                                   AJAY SPORTS, INC.



                                                By:  \s\Thomas W. Itin
                                                     -------------------------
                                                     Thomas W. Itin, President

        Pursuant to the  requirements  of the  Securities  Exchange Act of 1934,
this Report on Form 10-K has been signed below by the  following  persons in the
capacities indicated and on the dates indicated.

SIGNATURES                          TITLE                              DATE
----------------------              -------------                    ---------


\s\Thomas W. Itin                   Director                     March 27, 1998
----------------------              and Principal
 Thomas W. Itin                     Executive Officer




\s\Duane R. Stiverson              Chief Financial               March 27, 1998
----------------------             Officer and
Duane R. Stiverson                 Principal Accounting
                                   Officer



\s\Robert R. Hebard                Director                      March 27, 1998
-----------------------
Robert R. Hebard



\s\Anthony B. Cashen               Director                      March 27, 1998
-----------------------
Anthony B. Cashen



\s\ Clarence H. Yahn               Director                      March 27, 1998
----------------------
Clarence H. Yahn



\s\ Robert D. Newman               Director                      March 27, 1998
--------------------
Robert D. Newman








                                       23

<PAGE>







                          INDEPENDENT AUDITOR'S REPORT







To the Board of Directors and Stockholders
of Ajay Sports, Inc. and  Subsidiaries


         We have audited the  accompanying  consolidated  balance sheets of Ajay
Sports,  Inc. and Subsidiaries as of December 31, 1997 and 1996, and the related
consolidated statements of operations,  stockholders' equity, and cash flows for
each of the three years in the period  ended  December  31,  1997.  We have also
audited the related  consolidated  financial  statement  schedules listed in the
index in Item 14 of this  Form 10-K for each of the  three  years in the  period
ended December 31, 1997. These consolidated  financial  statements and financial
statement  schedules are the  responsibility  of the Company's  management.  Our
responsibility  is  to  express  an  opinion  on  these  consolidated  financial
statements and financial statement schedules based on our audits.

         We conducted our audits in accordance with generally  accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable  assurance about whether the  consolidated  financial  statements are
free of material  misstatement.  An audit includes  examining,  on a test basis,
evidence  supporting the amounts and disclosures in the  consolidated  financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

         In our opinion,  the  consolidated  financial  statements and financial
statement  schedules referred to above present fairly, in all material respects,
the financial position of Ajay Sports,  Inc. and Subsidiaries as of December 31,
1997 and 1996, and the results of their operations and their cash flows for each
of the three years in the period  ended  December  31, 1997 in  conformity  with
generally accepted accounting principles.






\s\Hirsch & Silberstein, P. C.
------------------------------
Hirsch & Silberstein, P.C.

Farmington Hills, Michigan
March 13, 1998






                                       F-1

<PAGE>
                       AJAY SPORTS, INC. AND SUBSIDIARIES
                           Consolidated Balance Sheets
                        as of December 31, 1997 and 1996
                      (in thousands, except share amounts)
<TABLE>
<CAPTION>

ASSETS                                                                          December 31,       December 31,
                                                                                    1997               1996
                                                                               ----------------   ----------------
<S>                                                                         <C>                   <C>
Current assets:
     Cash                                                                    $             234  $              64
     Accounts receivable, net of allowance of $243 and $140,
         respectively                                                                    5,060              5,274
     Inventories                                                                         6,398              7,957
     Prepaid expenses and other                                                            304                362
     Deferred tax benefit                                                                  363                363
                                                                               ----------------   ----------------

            Total current assets                                                        12,359             14,020

Fixed assets, net                                                                        1,723              1,822
Other assets                                                                               106                320
Deferred tax benefit                                                                       756                756
Goodwill                                                                                 1,670              1,709
                                                                               ----------------   ----------------

            Total assets                                                     $          16,614  $          18,627
                                                                               ================   ================

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

Current liabilities:
     Notes payable to affiliates                                             $             160  $             885
     Notes payable to banks                                                                107              6,104
     Current portion of capital lease                                                        4                  9
     Accounts payable                                                                    3,204              3,107
     Accrued expenses                                                                      684                567
                                                                               ----------------   ----------------

            Total current liabilities                                                    4,159             10,672

Notes payable to affiliates  -  long term                                                4,212                 -0-
Notes payable to banks - long term                                                       9,017              5,213
Commitments and contingencies                                                               -0-                -0-
                                                                               ----------------   ----------------
                                                                                        17,388             15,885
                                                                               ----------------   ----------------
Stockholders' equity (deficit):
     Preferred stock - 10,000,000 shares authorized
         Series B, $0.01 par value, 12,500
            shares outstanding at liquidation value                                      1,250              1,250
         Series C, $10.00 par value, 296,170 shares
            outstanding at stated value                                                  2,962              2,962
     Common stock, $0.01 par value, 100,000,000 shares authorized,
         23,274,039 shares outstanding                                                     233                233
     Additional paid-in capital                                                          9,313              9,313
     Accumulated deficit                                                               (14,532)           (11,016)
                                                                               ----------------   ----------------

            Total stockholders' equity (deficit)                                          (774)             2,742
                                                                               ----------------   ----------------

Total liabilities and stockholders' equity                                   $          16,614  $          18,627
                                                                               ================   ================

              The accompanying notes are an integral part of the consolidated financial statements.

                                                          F-2
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                                          AJAY SPORTS, INC. AND SUBSIDIARIES
                                                          Consolidated Statements of Operations
                                                       for the years ended December 31, 1997, 1996 and 1995
                                                           (in thousands, except per share amounts)

                                                                                    Year Ended
                                                               ------------------------------------------------------
                                                                December 31,       December 31,        December 31,
                                                                    1997               1996                1995
                                                               ----------------   ----------------    ---------------
<S>                                                         <C>                 <C>                   <C>
Operating data:
     Net sales                                               $          30,330  $          24,341   $         18,728
     Cost of sales                                                      26,585             20,759             15,291
                                                               ----------------   ----------------    ---------------
         Gross profit                                                    3,745              3,582              3,437
     Selling, general and administrative expenses                        5,837              5,067              3,247
                                                               ----------------   ----------------    ---------------

     Operating income (loss)                                            (2,092)            (1,485)               190
                                                               ----------------   ----------------    ---------------

Nonoperating income (expense):
     Interest expense - net                                             (1,280)            (1,103)              (801)
     Other, net                                                           (144)               (38)               (41)
                                                               ----------------   ----------------    ---------------

     Total non operating expense                                        (1,424)            (1,141)              (842)
                                                               ----------------   ----------------    ---------------

Income (loss) before income taxes                                       (3,516)            (2,626)              (652)

Income tax expense (benefit)                                                -0-              (893)              (208)
                                                               ----------------   ----------------    ---------------

Net loss                                                     $          (3,516) $          (1,733)  $           (444)
                                                               ================   ================    ===============

Basic and diluted earnings per share                         $            (0.17)$           (0.09)  $          (0.03)
                                                               ================   ================    ===============

Weighted average common and common stock
     equivalent shares outstanding                                      23,274             23,242             22,722
                                                               ================   ================    ===============






















               The accompanying notes are an integral part of the consolidated financial statements.

</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                     AJAY SPORTS, INC. AND SUBSIDIARIES
                 Consolidated Statements of Stockholders' Equity for the years ended December 31, 1997, 1996 and 1995
                                                    (in thousands, except shares)



                                          Preferred Stock           Common Stock                                           Total
                                        -----------------------------------------------  Add'l Paid-in     Accum       Stockholders-
                                          Shares     Amount       Shares        Amount      Capital      (Deficit)         Equity
                                        ----------- ---------  --------------  --------- --------------  ----------- ---------------
<S>                                     <C>           <C>      <C>             <C>       <C>             <C>         <C>
Balances at January 1, 1995                 12,500     1,250      22,533,637 $      225          8,961 $     (8,401)          2,035

Common stock issued to ESOP                 -          -              12,000         -               4            -               4

Stock issued to fund acquisition            -          -             895,054          9            572            -             581

Common stock issued to affiliate
  for acquisition services                  -          -             100,000          1             37            -              38

Common stock issued in lieu of
  wages to officer                          -          -              34,000          1              9            -              10

Preferred stock public offering            325,000     3,250         -                -           (386)           -           2,864

Preferred stock converted into
  common stock                             (11,210)     (112)        163,055          2            110            -               -

Common shares received as
  an acquisition cost adjustment            -          -            (400,000)        (4)          (184)           -            (188)

Dividends                                   -          -             -            -            -               (136)           (136)

Net loss                                    -          -             -            -            -               (444)           (444)
                                        ----------- ---------  --------------  --------- --------------  ----------- --------------

Balances at December 31, 1995              326,290     4,388      23,337,746        234          9,123       (8,981)          4,764

Common shares received as an
  acquisition incentive adjustment          -          -            (350,000)        (3)             4       -                   -

Preferred stock converted into
  common stock                             (17,620)     (176)        256,293          2            174       -                   -

Stock option exercise                       -          -              30,000      -                 12       -                  12

Dividends                                   -          -             -            -            -               (301)           (301)

Net loss                                    -          -             -            -            -             (1,733)         (1,733)
                                        ----------- ---------  --------------  --------- --------------  ----------- ---------------

Balances at December 31, 1996              308,670     4,212      23,274,039        233          9,313      (11,015)          2,742

Net loss                                    -          -             -            -            -             (3,516)         (3,516)
                                        --------------------------------------------------------------------------------------------

Balances at December 31, 1997              308,670  $  4,212      23,274,039 $      233  $       9,313 $    (14,531)           (774)
                                        =========== =========  ==============  ========= ==============  ===========  ==============

                        The accompanying notes are an integral part of the consolidated financial statements.


</TABLE>


                                                           F-4
<PAGE>
<TABLE>
<CAPTION>
                                                       AJAY SPORTS, INC. AND SUBSIDIARIES
                                                      Consolidated Statements of Cash Flows
                                                   for the years ended December 31, 1997, 1996 and 1995
                                                                           (in thousands)



                                                                                  1997            1996            1995
                                                                               ------------    ------------   -------------
<S>                                                                            <C>             <C>            <C>
Cash flows from operating activities:

     Net loss                                                                $      (3,516)  $      (1,733) $         (444)
     Adjustments to reconcile to net cash flows from operating
         activities:
     Loss on sale of assets                                                             42               6              -0-
     Depreciation and amortization                                                     358             366             219
     (Increase) decrease in accounts receivable, net                                   214             (78)         (3,496)
     (Increase) decrease in inventories                                              1,559             952          (3,123)
     (Increase) in deferred tax benefits                                                -0-           (911)           (208)
     (Increase) decrease in prepaid expenses                                            58               3            (154)
     (Increase) decrease in other assets                                               202             (84)            (66)
     Increase in accounts payable                                                       97             945             852
     Increase (decrease) in accrued expenses                                           186             (64)            141
                                                                               ------------    ------------   -------------

         Net cash (used in) operating activities                                      (800)           (598)         (6,279)
                                                                               ------------    ------------   -------------

Cash flows from investing activities:

     Acquisitions of property plant and equipment                                     (250)           (276)           (787)
     Goodwill associated with acquisitions                                              -0-           (387)         (1,329)
     Proceeds from sale of equipment                                                    -0-             -0-              5
     Disposal of equipment                                                              -0-            (29)             -0-
                                                                               ------------    ------------   -------------

         Net cash (used in) investing activities                                      (250)           (692)         (2,111)
                                                                               ------------    ------------   -------------

Cash flows from financing activities:

     Proceeds from issuance of notes payable to affiliates                           3,487             885              -0-
     Net increase (decrease) in bank notes payable                                  (2,193)            396          10,777
     Payments on notes payable - affiliate                                              -0-             -0-         (5,369)
     Dividends paid                                                                    (74)           (301)            (58)
     Proceeds from preferred stock offering, net of related costs                       -0-             -0-          2,864
     Stock issued in acquisitions                                                       -0-             -0-            433
     Stock options exercised                                                            -0-             12              -0-
                                                                               ------------    ------------   -------------

         Net cash provided by financing activities                                   1,220             992           8,647
                                                                               ------------    ------------   -------------

Net increase (decrease) in cash                                                        170            (298)            257

Cash at beginning of period                                                             64             362             105
                                                                               ------------    ------------   -------------
                                                                                                              -------------

Cash at end of period                                                        $         234   $          64  $          362
                                                                               ============    ============   =============




            The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>

                                                           F -5

<PAGE>


                       AJAY SPORTS, INC. AND SUBSIDIARIES
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued

                       AJAY SPORTS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





1.       SIGNIFICANT ACCOUNTING POLICIES

          BASIS OF PRESENTATION - The consolidated  financial statements include
          the  accounts of Ajay Sports,  Inc.  ("Sports")  and its  wholly-owned
          operating company subsidiaries,  Ajay Leisure Products, Inc. ("Ajay"),
          Leisure Life,  Inc.  ("Leisure"),  and Palm Springs Golf,  Inc. ("Palm
          Springs"),  collectively  referred  to  herein as the  "Company".  The
          inventories  and fixed  assets  purchased  from Korex  Corporation  on
          October 2, 1995 have been merged with Ajay Leisure Products,  Inc. All
          significant   intercompany   balances  and   transactions   have  been
          eliminated.

          INVENTORIES  -  Inventories  are stated at the lower of cost or market
          with cost determined using the first-in, first-out method.

          FIXED  ASSETS - Fixed  assets  are  stated at cost,  less  accumulated
          depreciation  of  $1,026,000  and $864,000 as of December 31, 1997 and
          1996  respectively.  Fixed assets of the Company consist  primarily of
          machinery   and   equipment,   office   equipment,   and  a  building.
          Depreciation  is  computed  using the  straight-line  method  over the
          estimated  useful  lives of the  assets,  which  range  from  three to
          thirty-nine years.

          GOODWILL - The Company has  recorded  goodwill as a result of the 1995
          acquisitions  of  Palm  Springs  and  Korex.  The  goodwill  is  being
          amortized  over  forty  years.  Amortization  expense  related  to the
          goodwill was $39,000 for the year ended December 31, 1997.

          OTHER  ASSETS - Other  assets at December 31, 1997 and 1996 consist of
          patents and trademarks held and applied for by Leisure Life.

          PRODUCT LIABILITY AND WARRANTY COSTS - Product  liability  exposure is
          insured with  insurance  premiums  provided  during the year.  Product
          warranty costs are based on experience and attempt to match such costs
          with the related product sales.

          REVENUE  RECOGNITION - The Company  recognizes  revenue when goods are
          shipped.

          INCOME  TAXES  -  Effective  January  1,  1992,  the  Company  adopted
          Statement of Financial Accounting Standards (SFAS) No. 109, Accounting
          for  Income  Taxes.  Under SFAS No.  109,  deferred  income  taxes are
          recognized for the tax consequences of temporary  differences  between
          the financial statement carrying amounts and the tax bases of existing
          assets and  liabilities,  using enacted  statutory rates applicable to
          future years.

          USE  OF  ESTIMATES  -  The  preparation  of  financial  statements  in
          conformity  with generally  accepted  accounting  principles  requires
          management to make estimates and assumptions  that affect the reported
          amounts of assets and liabilities and disclosure of contingent  assets
          and  liabilities  at the  date  of the  financial  statements  and the
          reported amounts of revenues and expenses during the reporting period.
          Actual results could differ from those estimates.




                                       F-6

<PAGE>




                       AJAY SPORTS, INC. AND SUBSIDIARIES
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued






2.       RELATED PARTY TRANSACTIONS

         The Company's related parties include the following:

         First Equity Corporation  ("First Equity") - First Equity is owned by a
         family member of the president,  chief executive officer,  and chairman
         of the  Company.  First  Equity  holds  demand  notes in the  amount of
         $748,000 as a result of loans made to the company in 1996 and 1997.

         Enercorp, Inc. - ("Enercorp") is a business development company engaged
         in the business of investing in and providing managerial  assistance to
         developing companies. The Company's president, chief executive officer,
         chairman and  principal  shareholder  is a significant  shareholder  in
         Enercorp. Enercorp acquired 1,764,706 common shares on October 3, 1994.
         In 1995 Enercorp acquired 2,000 shares of series C preferred stock, and
         also received  100,000 shares of common stock for services  rendered in
         connection  with the Palm Springs  acquisition.  Enercorp  also holds a
         note in the amount of $200,000 payable by the company on demand.

         Williams  Controls,  Inc.  -  ("Williams")  -  Williams  has the  same
         chairman as the Company,  which  individual is a major  shareholder of
         each company.  Williams owns 4,117,647  shares of the Company's common
         stock as of December 31, 1997.

         The  Company  has  agreed  to  pay  Williams  0.25%  per  annum  of the
         outstanding   revolving   loan   balances  on  a  quarterly   basis  in
         consideration  for providing its guarantee of the revolving  loan. Fees
         totaled  $39,750 and $60,411 for the years ended  December 31, 1997 and
         1996 respectively.

         The  Company's  interest  expense  paid to Williams  was  $194,450  and
         $448,000 for the years ended  December 31, 1997 and 1996  respectively.
         (See Notes 4 and 14).

         During 1997 and 1996 the Company  borrowed from related and  affiliated
         parties.  As of December 31, 1997 and 1996, the Company owed $4,372,000
         and $885,000 respectively to related and affiliated parties at interest
         rates ranging from 9.0% to 9.5%. (See Note 4).

3.       INVENTORIES

         Inventories consist of the following (in thousands):
                                                         December 31,
                                                    1997            1996
                                                   ------          ------
              Raw materials                        $1,499          $4,153
              Work-in-progress                      1,026             995
              Finished goods                        3,873           2,809
                                                   ------           -----

              Total                                $6,398          $7,957
                                                    =====           =====

                                       F-7

<PAGE>




                       AJAY SPORTS, INC. AND SUBSIDIARIES
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued






4.       DEBT

              On July 25,  1995,  the  Company  entered  into a  Revolving  Loan
         Agreement with United States National Bank of Oregon ("U. S. Bank") for
         a credit  facility of up to $8,500,000,  at which time a term loan from
         Williams was paid off. All of the Company's  subsidiaries  and Williams
         guaranteed  payment of this  credit  facility  and the  Company and its
         subsidiaries pledged their inventory and receivables as collateral.  On
         October 2, 1995 the Company and U. S. Bank agreed to  modifications  to
         the  Revolving  Loan  Agreement  increasing  the credit  facility  from
         $8,500,000  to  $13,500,000.  The Company was permitted to borrow up to
         $8,500,000  against  80% of  eligible  accounts  receivable  and 50% of
         eligible  inventory  and up to an  additional  $5,000,000  through  its
         2-year bulge loan facility. The increased facility provided the Company
         the funds necessary to acquire certain assets of both Korex Corporation
         and Palm Springs Golf Company, Inc. in early October, 1995. In November
         1996,  U.  S.  Bank  advised  the  Company  that  the  Company  was  in
         noncompliance  with certain  covenants under its loan  agreement.  Ajay
         operated  until  February 12, 1997 on a revolver limit of $8.5 million.
         On  February  12, 1997 U. S. Bank  reduced  the line to a $7.0  million
         maximum  facility.  This caused the Company to rely on extended  credit
         terms from its venders and additional funds from related and affiliated
         parties.  On April  14,  1997 U. S. Bank  agreed to waive the  existing
         default  and  restructure  the line to its former  $8.5  million  limit
         requiring a $250,000 term loan payment in June, less favorable  formula
         borrowing rates and an increased interest rate.

              On July 11, 1997,  the Company  refinanced its bank debt through a
         $34,088,000  three-year revolving credit and term loan agreement with a
         new lender (the "Loan"). This loan is a joint and several obligation of
         the Company with  Williams  Controls,  Inc.  ("Williams"),  under which
         Williams  is the  agent for all of the  borrowers.  The  combined  Loan
         facility  consists  of  a  $26,000,000  revolving  loan  facility  (the
         "Revolver"),  a $2,658,000 real estate loan (the "Real Estate Loan"), a
         $4,430,000  machinery  and  equipment  loan  ("Term  Loan  I"),  and  a
         $1,000,000 term loan II ("Term Loan II").

              At the closing date,  the Company  borrowed  $6,825,000  under the
         Revolver  and  $566,000  under  Term  Loan I. At the  date of  closing,
         Williams  borrowed a total of  $17,141,000,  consisting  of  $9,619,000
         under the Revolver,  $2,658,000 under the Real Estate Loan,  $3,864,000
         under Term Loan I, and $1,000,000 under Term Loan II. The proceeds from
         the  Company's  and  Williams'  borrowings  under the Loan were used to
         repay the  Company's and Williams'  loans from their  previous  lender,
         except for $2,340,000  which represents a bridge loan to the Company by
         the previous lender.  This bridge loan is to be repaid from the sale of
         assets  and/or  excess cash flow and is  guaranteed up to $1,000,000 by
         the Company's President.







                                       F-8

<PAGE>




                       AJAY SPORTS, INC. AND SUBSIDIARIES
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued




              Under the  Revolver,  the  Company and  Williams  can borrow up to
         $26,000,000 based upon a borrowing base  availability  calculated using
         specified  percentages of eligible  accounts  receivable and inventory.
         The Revolver  bears interest at the Bank's prime rate (8.5% at December
         31, 1997) plus 0.5%. The Real Estate Loan and Term Loan I bear interest
         at the Bank's prime rate plus 0.75%. At the Agent's  option,  funds may
         be borrowed under the Revolver,  the Real Estate Loan and the Term Loan
         I at the London InterBank Offering Rate ("Libor") plus 2.75%, 3% and 3%
         respectively.  The Revolver, Real Estate Loan and Term Loan I mature on
         July 11, 2000 and are secured by substantially all of the assets of the
         Company and Williams.  The Real Estate Loan is being  amortized over 20
         years and the  machinery and Term Loan are being  amortized  over seven
         years with all remaining principal outstanding due on July 11, 2000. At
         July 11, 1997,  after the Loan closing,  approximately  $1,545,000  was
         available  for  borrowing  under the New Loan.  Term Loan II matures on
         June 1, 1999 with principal payments based upon an amortization  period
         of 24 months plus  additional  principal  payments  equal to any excess
         proceeds from the sale of one of Williams' subsidiaries after repayment
         of any indebtedness  under the Revolver borrowing due from the Williams
         subsidiary  being  sold  plus  principal  payments  equal to 50% of the
         Company's  and  Williams'  annual  consolidated  excess  cash  flow  as
         defined.  The Loan agreement  restricts payment of any dividends by the
         Company, requires the Company and Williams in the aggregate to maintain
         minimum  working  capital of $25,000,000  exclusive of the Revolver and
         maintain  minimum  tangible  net  worth of  $11,000,000.  The Loan also
         restricts  additional  indebtedness  and common stock  repurchases  and
         restricts  combined Company and Williams'  annual capital  expenditures
         and increased  operating lease  obligations to $2,500,000 and $600,000,
         respectively. The Loan agreement imposes a prepayment penalty of 3%-5%,
         which is waived if the Loan is repaid  with  proceeds  from the sale of
         assets or equity or is refinanced  with an affiliate of the Bank.  (See
         Note 14).

              The  Company  agreed  to  pay  Williams  0.25%  per  annum  of the
         outstanding   Revolving   Loan   balance  on  a   quarterly   basis  in
         consideration  for  providing  its  guarantee  of the  Revolving  Loan.
         Guarantee fees paid Williams were $39,750 in 1997 and $60,411 in 1996.

















                                       F-9

<PAGE>




                       AJAY SPORTS, INC. AND SUBSIDIARIES
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued




              The Company's Bank borrowings consisted of the following:

                                                            December 31,
         Revolving credit facility:                    1997             1996
                                                    ------------  -------------
           Balance                                  $6,016,985      $11,103,844
           Interest rate                                  9.0%            8.25%
           Unused amount of facility                $   95,800      $ 2,396,156
           Average amount outstanding
           during the period                         6,091,000       11,059,660

           Weighted average interest rate                 9.0%            8.25%
           Maximum amount outstanding
           during the period                         7,218,000       13,481,108

                  Outstanding commercial letters of credit totaled approximately
         $526,000 and $322,000 at December 31, 1997 and 1996 respectively.

                  Other  December  31, 1997 debt  consisted of  $4,372,000  from
         related and affiliated parties, a $539,000 machinery and equipment term
         loan with Wells Fargo, a $2,340,000 term loan with U. S.
         Bank and a $210,000 real estate loan.

                  Debt payments are as scheduled (in thousands):

                  1998                       $    267
                  1999                            107
                  2000                            107
                  2001                          8,785   (Term Loans & Revolver)
                  2002                              -
                  2003 and thereafter               -

                  The seasonal nature of the Company's sales creates fluctuating
         demands on its cash flow, due to the temporary  build-up of inventories
         in anticipation  of, and  receivables  subsequent to, the peak seasonal
         period which  historically  has been from February  through May of each
         year.  The  Company  has relied and  continues  to rely  heavily on its
         revolving  credit facility for its working capital  requirements.  (See
         Note 14).









                                      F-10

<PAGE>




                       AJAY SPORTS, INC. AND SUBSIDIARIES
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued




5.       INCOME TAXES
                  As  discussed  in Note 2, the Company  adopted SFAS No. 109 at
         the  beginning  of  1992.  There  was  no  cumulative  effect  of  this
         accounting change and its adoption had no impact on 1992 net income.

                  The  actual  income tax  expense  (benefit)  differs  from the
         statutory income tax expense (benefit) as follows (in thousands):

                                            Year      Ended        December 31,
                                           1997        1996          1995
      Statutory tax expense
        (benefit) at 34%                 $(1,195)    $ (893)        $ (208)
      Utilization of net
        operating loss
        carry forward                         -            -              -
      Loss producing no current
        tax benefit                        1,195        893            208
                                           -----       -----          -----
                                         $    -     $      -       $      -
                                         =========   ========        =======


      The components of the net deferred tax asset/liability were as follows (in
thousands):

                                                                December 31,
                                                              1997        1996
                                                             ------      ------
      Deferred tax asset, principally accrued
        expenses, reserves and loss carry forwards          $ 4,443     $ 3,274
      Deferred tax liability,
        principally depreciation and amortization               (97)       (107)
      Valuation allowance                                    (3,227)     (2,048)
                                                             -------    --------

      Net                                                     $1,119    $ 1,119
                                                              =======   ========

                  The Company has assessed its past earnings history and trends,
      sales backlog,  budgeted sales, and expiration dates of carryforwards  and
      has determined that it is more likely than not that $1,119,000 of deferred
      tax  assets  will  be  realized.  The  remaining  valuation  allowance  of
      $3,227,000  is maintained on deferred tax assets which the Company has not
      determined to be more likely than not realizable at this time. The Company
      will continue to review this valuation  allowance on a quarterly basis and
      make adjustments as appropriate.






                                      F-11

<PAGE>




                       AJAY SPORTS, INC. AND SUBSIDIARIES
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued




                  The Company had net operating  loss carry forwards for Federal
      tax purposes of  approximately  $11,975,000  at December  31, 1997,  which
      expire in varying  amounts in the years 2006 through 2012.  Operating loss
      carry forwards totaling $723,000,  $4,799,000 and $1,562,000 are available
      to offset  future state  taxable  income of Sports,  Ajay and Leisure Life
      respectively,  which  expire in varying  amounts in the years 2006 through
      2012.  Future  changes in  ownership,  as  defined  by section  382 of the
      Internal  Revenue  Code,  could  limit the  amount of net  operating  loss
      carryforwards used in any one year.

6.    STOCKHOLDERS' EQUITY

      (a)         Preferred Stock

                           On October 3, 1994 the Company created a new class of
                  Series B 8% Cumulative Convertible Preferred Stock and allowed
                  for  its  exchange,  on  a  share-for-share  basis,  with  the
                  Company's  Series A Preferred  Stock.  On that same day,  TICO
                  notified  the Company  that it wished to  exchange  the 29,500
                  shares of Series A  Preferred  Stock for 29,500  shares of the
                  newly issued Series B Preferred  Stock, as was permitted under
                  the  Certificate of  Designations of Rights and Preferences of
                  the Series B Preferred  Stock. On that same day, TICO notified
                  the  Company  that it wished to convert  17,000  shares of its
                  Series B Preferred  Stock for  5,040,000  shares of the Common
                  Stock of the Company,  as the Series B Preferred Stock allowed
                  for a conversion  rate of 1 share of Series B Preferred  Stock
                  for 294.12 shares of the Company's  Common Stock.  In November
                  1997, the conversion rate was revised to 555.56.

                           Cumulative  dividends  are  payable  on the  Series C
                  Preferred  Stock at an  annual  rate of $1.00 per  share.  The
                  Warrants  are  redeemable  by the Company at $0.05 per Warrant
                  under  certain  conditions.  The terms of these  Warrants  are
                  identical to the Company's  publicly-held Warrants to purchase
                  Common Stock. In 1995 the Company used the $2.8 million of net
                  proceeds for inventory and accounts  receivable  financing and
                  to acquire certain assets of Korex and Palm Springs.

                           On July 26, 1995 the Company's Registration Statement
                  filed in  connection  with an  offering  of 325,000  shares of
                  Series  C  10%  cumulative  Convertible  Preferred  Stock  and
                  325,000  Warrants  was  declared   effective.   The  Series  C
                  Preferred  Stock is  convertible  into shares of the Company's
                  Common  Stock  based on a value of $10.00  for each  Preferred
                  share and $.6875 for the Common.








                                      F-12

<PAGE>




                       AJAY SPORTS, INC. AND SUBSIDIARIES
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued




                           At December  31,  1997,  1996 and 1995,  dividends in
                  arrears on the 8% cumulative  convertible  preferred  series B
                  stock were $906,575  ($72.53 per share),  $806,575 ($64.53 per
                  share)  and   $706,575   ($56.53  per  share),   respectively.
                  Dividends  on the series C  cumulative  convertible  preferred
                  stock have been  declared and paid through  December 31, 1996.
                  At  December  31,  1997   dividends  in  arrears  on  the  10%
                  cumulative  convertible preferred series C stock were $296,000
                  ($1.00 per share). This represents the undeclared dividend for
                  1997. The Company has dedicated all available funds to support
                  continuing  operations  of the Company until  sufficient  cash
                  availability allows payment of dividends.
                  (See Note 14)

      (b)         Stock issued to officers

                           The Company has a stock  incentive  plan for officers
                  of the  Company,  under  which  up to  150,000  shares  of the
                  Company's stock may be granted  annually.  In 1995 the Company
                  issued 34,000 shares to an officer in lieu of compensation. No
                  stock was issued to officers under this plan in 1996 or 1997.

      (c)         Stock Issued for Acquisitions

                           On August 1, 1994 the Company reached an agreement in
                  principle to acquire the  outstanding  common stock of Leisure
                  Life,  Inc. In exchange for  acquiring all the common stock of
                  Leisure  Life,  the  Company  issued  1,500,000  shares of its
                  common  stock to the owners of Leisure  Life,  with 400,000 of
                  those  shares  being  issued  subject to  certain  performance
                  requirements being met by Leisure Life.

                           In  November  1995 the former  owner of Leisure  Life
                  returned  400,000  shares of stock to the Company and in March
                  1996 returned 200,000 shares due to not achieving  performance
                  requirements. An additional 150,000 1996 performance incentive
                  shares held in escrow  since  March 1996 were  returned to the
                  Company in April 1997.















                                      F-13

<PAGE>




                       AJAY SPORTS, INC. AND SUBSIDIARIES
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued








      (d)         Warrants and Options

                           A summary of activity related to warrants and options
                  to purchase Company common stock is as follows:
                                          Warrants and              Price
                                          Options              Per  Share
                                          ------------         -----------
         Balance, January 1, 1995           15,737,577      $  .34 - 1.00

         Issued to employees                   295,000         .625 - .6875 (I)
         Williams options adjusted          (1,046,234)        .50 - 1.00   (ii)

         Issued - public offering              373,750        1.00         (iii)
         Issued to Directors                    10,000         .66          (iv)
                                          -------------
         Balance, December 31, 1995         15,370,093      $  .34 - 1.00

         Exercised by Employees                (30,000)        .40
         Issued to Directors                    10,000         .625          (v)
         Issued to Employees                   700,000         .40          (vi)
         Issued for Acquisition                800,000         .75 - .90   (vii)
         Expired                              (242,500)        .80 - 1.00
                                            -----------
         Balance, December 31, 1996         16,607,593      $  .34 - 1.00

         Issued to Employees                    50,000         .40        (viii)
         Expired                              (165,000)        .40 - .625
         Repriced options                  (12,907,873)        .34 - .50    (ix)
         Repriced options                   12,907,873         .18          (ix)
                                           ------------
         Balance, December 31, 1997         16,492,593      $  .18 - 1.00













                                      F-14

<PAGE>




                       AJAY SPORTS, INC. AND SUBSIDIARIES
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued





          (I)  Employee  stock  options of which  146,250  shares are vested and
          100,000 have been canceled since issuance.

          (ii)  Warrants  returned by Williams as  consideration  for early loan
          payoff.

          (iii) Public offering of July 26, 1995.

          (iv) Director stock options of which 6,666 have vested.

          (v) Director stock options of which 3,333 have vested.

          (vi)  Employee  stock  options of which 257,500 are vested and 185,000
          have been canceled since issuance.

          (vii) Issued to former  shareholders  of Palm  Springs  Golf  Company,
          Inc., a business acquired by the Company in October 1995.

          (viii) Employee stock options of which none have vested.

          (ix) All  non-public,  non-employee,  non-board  member  options  were
          repriced to $.18 market in November 1997.


7.    MAJOR CUSTOMERS

         The Company  operates in two lines of  business,  the  manufacture  and
      distribution  of sports  equipment  and  outdoor  leisure  furniture.  The
      Company's  customers  are  principally  in the retail  sales  market.  The
      Company  performs ongoing credit  evaluations of its customers'  financial
      conditions and does not generally require collateral.


              Sales to customers  which  represent over 10% of the Company's net
sales are as follows:

                                         Year  ended  December 31,
         Customer                   1997           1996            1995
         --------                   ----           ----            ----
              A                     30%             29%             36%
              B                     15%             14%               *
              C                     11%               *               *


                   * Amounts are less than 10% of net sales.


                                      F-15

<PAGE>




                       AJAY SPORTS, INC. AND SUBSIDIARIES
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued




8.      BUSINESS SEGMENT REPORTING

              The  relative  contributions  to net sales,  operating  profit and
        identifiable  assets of the Company's two industry segments for the year
        ended December 31, 1997 and 1996 are as follows (in thousands):

<TABLE>
<CAPTION>
                                                                           GOLF
                                                              Mass       Specialty
                         1997               Furniture     Merchant     Golf Stores     Corporate    Consolidated
              ---------------------------   ---------     --------    ------------     ---------    ------------
<S>                                         <C>           <C>         <C>              <C>          <C>

        Sales                                 $4,358      $21,623         $ 4,349            -         $ 30,330
        Operating profit/(loss)                 (186)         915          (2,090)        (731)          (2,092)
        Assets                                 2,456       10,914           3,244            -           16,614
        Depreciation/Amortization                 80          215              63            -              358
        Capital Expenditures                     136          103              11            -              250

                                                                           GOLF
                                                              Mass       Specialty
                         1996               Furniture     Merchant     Golf Stores    Corporate     Consolidated
              ---------------------------   ---------     --------     -----------    ---------     ------------
        Sales                                  $2,701      $17,290          $4,350            -          $24,341
        Operating profit/(loss)                  (193)         262          (1,068)        (486)          (1,485)
        Assets                                  2,512       10,554           5,429            -           18,495
        Depreciation/Amortization                  98          222              46            -              366
        Capital Expenditures                       63          145              68            -              276

</TABLE>

9 .     SPALDING LICENSE AGREEMENT

              Ajay has a license from Spalding  Sports  Worldwide to utilize the
        Spalding trademark in conjunction with the sale and distribution of golf
        bags,  golf  gloves,  hand  pulled  golf  carts and  certain  other golf
        accessories in the United  States.  As  consideration  for this license,
        Ajay is required to pay  royalties to Spalding  based on a percentage of
        sales,  subject to annual  minimums of $500,000  for the year ended June
        30,  1995,  and  $550,000 for the years ended June 30, 1996 through June
        30, 1998. The current  agreement expires June 30, 1998. Other conditions
        of the  agreement  require  the  Company to expend 2% of sales under the
        agreement  on  advertising  and  related  costs,  with  1%  remitted  to
        Spalding.  The Company must also maintain a current ratio of 1.0 to 1.0.
        Approximately  57% of the  Company's  1997  and 52% of 1996  sales  were
        Spalding products. (See Note 14).

              Earned royalty  expense due Spalding was $553,000,  $480,000,  and
        $484,000  for  the  years  ended  December  31,  1997,  1996  and  1995,
        respectively.






                                      F-16

<PAGE>




                       AJAY SPORTS, INC. AND SUBSIDIARIES
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued




10.     LEASES

              Future  aggregate  minimum  lease  payments  under   noncancelable
        operating  leases with initial or remaining  terms in excess of one year
        are as follows (in thousands):

                           1998                                         $    697
                           1999                                              682
                           2000                                              646
                           2001                                              440
                           2002                                              177
                           2003 and thereafter                               447
                                                                           -----

                                                                          $3,089
                                                                          ======
                  Total rental expense (in  thousands)  under  operating  leases
         (net of sublease  rental  income from an  affiliate  of $0, $8 and $13,
         respectively) was $701, $618, and $627 for the years ended December 31,
         1997, 1996 and 1995, respectively.

11.      NET  (LOSS) PER COMMON SHARE

                  Earnings or loss per share has been  computed by dividing  net
         income or loss,  after  reduction for preferred stock dividends in 1997
         ($396,000),  in 1996  ($401,000)  and 1995  ($236,000)  by the weighted
         average  number of common shares  outstanding.  No exercise of warrants
         outstanding was assumed in 1997,  1996, or 1995,  since any exercise of
         warrants would be antidilutive.

                  The Financial  Accounting  Standards  Board ("FASB")  recently
         issued  SFAS No. 128,  "Earnings  Per Share",  which is  effective  for
         fiscal years ending after December 15, 1997.  This  statement  replaces
         the   presentation  of  primary  earnings  per  share  ("EPS")  with  a
         presentation of basic EPS. It also requires dual  presentation of basic
         and diluted EPS on the face of the income  statement  for all  entities
         with complex  capital  structures  and requires  reconciliation  of the
         numerator  and  denominator  of  the  basic  EPS  computations  to  the
         numerator and  denominator  of the diluted EPS  computation.  Basic EPS
         excludes  dilution.  Diluted EPS reflects the  potential  dilution that
         could occur if securities or other contracts to issue common stock were
         exercised or converted into common stock or resulted in the issuance of
         common stock that then shared the  earnings of the entity.  Diluted EPS
         is  computed  similar  to fully  diluted  EPS.  SFAS No.  128  requires
         restatement  of all EPS data that was  presented  in  previously  filed
         reports.  Earnings per share amounts for 1996 and 1995 have not changed
         under SFAS No. 128 since the warrants outstanding are anti-dilutive.

12.      SUPPLEMENTAL CASH FLOW INFORMATION

                  Cash paid for interest was $776,077,  $1,098,819  and $762,157
         for the years ended December 31, 1997, 1996 and 1995, respectively.


                                      F-17

<PAGE>




                       AJAY SPORTS, INC. AND SUBSIDIARIES
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued






         Non cash financing and investing transactions were as follows:

         o        In exchange  for  acquiring in 1994 all of the common stock of
                  Leisure Life, Inc. the Company issued  1,500,000 shares of its
                  common stock to the owner of Leisure Life.  In November,  1995
                  the former owner of Leisure Life surrendered 400,000 shares of
                  the  Company's  common  stock and in March,  1996  surrendered
                  200,000  shares  of the  Company's  common  stock due to unmet
                  performance requirements.

         o        In 1995, 11,210 preferred stock shares were converted into
                  163,055 shares of common stock.

         o        During 1995 the Company issued common stock as follows:


                  Issued to                                            Shares
                  -----------------                                  ---------
                   Employees                                           12,000
                   Fund acquisitions                                  895,054
                   Affiliate in lieu of payment for services          100,000
                   Officer in lieu of bonus                            34,000


         o        During 1996, 17,620 preferred stock shares were converted into
                  256,293 shares of common stock.

         o        In 1996 an employee exercised options to acquire 30,000 common
                  shares.

         o        In 1997 there were no stock transactions.

         o        The Company added new leases during 1997 which represent asset
                  values, if purchased,  of approximately  $57,000 and result in
                  annual lease  payments of $18,732  with terms  expiring in the
                  year 2000.

13.      COMMITMENTS  AND  CONTINGENCIES

                  The Company is subject to certain  claims in the normal course
         of  business  which  management  intends  to  vigorously  contest.  The
         outcomes of these  claims are not  expected to have a material  adverse
         affect on the Company's  consolidated  financial position or results of
         operations.





                                      F-18

<PAGE>




                       AJAY SPORTS, INC. AND SUBSIDIARIES
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued






14.      SUBSEQUENT  EVENTS

     a. The Company is  currently  reviewing  a proposal  from  Spalding  Sports
     Worldwide to extend its current license  agreement,  due to expire June 30,
     1998,  through  June 30,  2000  under  the same  terms  and  conditions  as
     presently  exist.  The Company's  sales of Spalding brand  merchandise  and
     gross profit  represented  57%, 52% and 53% of Ajay's total sales and gross
     profit for the years ended December 31, 1997, 1996 and 1995, respectively.

     b. At a civil  action jury trial that  concluded  on February 6, 1998 under
     which Ajay Sports,  Inc. was plaintiff,  a judgment was entered against the
     defendants.  The jury awarded the Company damages of $210,000,  interest of
     $40,000 and $4,000 of expenses. Since post trial motions have been made and
     are under  consideration by the court,  thus raising  uncertainties at this
     time,  the amount of damages plus  interest  has not been  reflected in the
     accompanying financial statements.

     c. On March 13,  1998,  the  Company's  bank,  Wells Fargo Bank,  agreed to
     increase  availability to Ajay on the Company's existing revolving loan. In
     addition,  Wells has agreed to separate the current  joint and several loan
     wherein Ajay Sports,  Inc. and Williams  Controls,  Inc. are combined under
     one loan.  Under this new financing  plan,  Williams  Controls,  Inc. would
     advance $1 million in loans to Ajay Sports. On March 27, 1998, the increase
     in availability  from Wells in the amount of $750,000 was completed.  It is
     anticipated  that this  refinancing  plan would be  completed by the end of
     April.

                                      F-19

<PAGE>


                                  Schedule VIII


                       AJAY SPORTS, INC. AND SUBSIDIARIES
                        Valuation and Qualifying Accounts
                  Years ended December 31, 1997, 1996, and 1995
                             (Amounts in Thousands)



<TABLE>
<CAPTION>

                                                                                                                Balance
                                                  Beginning         Charged to        Deducted from              at end
                                                   Balance           expense          Reserve                   of period
<S>                                               <C>               <C>              <C>                       <C>

Reserve for Product Warranty:

    Year ended:

       December 31, 1997                               $  85             $309                $242  (1)             $152
       December 31, 1996                                 136              203                 254                    85
       December 31, 1995                                 139              198                 201                   136


Reserve for Doubtful Receivables:

    Year ended:

       December 31, 1997                                $140            $ 355                $252  (2)             $243
       December 31, 1996                                 287               91                 238                   140
       December 31, 1995                                 101              330                 144                   287


Reserve for Inventory Obsolescence:

    Year ended:

       December 31, 1997                                $491             $398                $464                  $425
       December 31, 1996                                 384              498                 391                   491
       December 31, 1995                                 430              378                 424                   384



Notes:

(1)  Represents amounts paid for product warranty claims.

(2)  Represents amounts charged off as uncollectible.


</TABLE>


                                      F-20

<PAGE>





EXHIBIT   21.0





                             LISTING OF SUBSIDIARIES





SUBSIDIARIES                                              STATE OF INCORPORATION
---------------------------                               ----------------------
Ajay Leisure Products, Inc.                               Delaware

Leisure Life, Inc.                                        Tennessee

Palm Springs Golf, Inc.                                   Colorado



                                      F-21

<PAGE>



EXHIBIT   23.1






                          INDEPENDENT AUDITORS' CONSENT


     We consent to the incorporation by reference in the Registration Statements
of Ajay Sports, Inc. and Subsidiaries on Form S-3 Registration No. 333-11365 and
Form S-8 of our report dated March 13, 1998  appearing in this Annual  Report on
Form 10-K of Ajay Sports,  Inc. and Subsidiaries for the year ended December 31,
1997.










\s\Hirsch & Silberstein, P.C.
-----------------------------
Hirsch & Silberstein, P.C.
March 13, 1998


                                      F-22

<PAGE>